Drop in oil prices, US yields to lift rupee to near 83/dollar
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The Indian rupee is expected to climb on Wednesday following a further decline in oil prices on worries over demand and a pullback in U.S. Treasury yields.
Non-deliverable forwards indicate the rupee, resuming trade after Tuesday's holiday, will open at around 83.00-83.02 to the U.S. dollar, compared with 83.1925 in the previous session.
"You would have to expect that the dip (in USD/INR) would find buyers," a forex trader at a bank said.
"Today's price action will be interesting, in that we will come to know how decently dips will be received. The RBI (Reserve Bank of India) will remain the biggest factor."
The RBI has been supporting the rupee for several sessions, and the intervention has been particularly aggressive in recent days.
Brent crude inched lower in Asia to close to $88 a barrel and is down more than 6% from last week's highs. Concerns over demand in the wake of weak euro zone data and diplomatic efforts to contain the Middle East conflict have dented the demand for oil.
The 10-year U.S. yield cooled off following the recent run-up to multi-year highs, last at 4.82%, which is 20 basis points off Friday's highs. Hedge fund manager Bill Ackman saying he was abandoning short bets on Treasuries accelerated the fall in the yields.
The dollar index was near 106.20.
External pressures on Asia "are easing this week" with 10-year U.S. yields and oil prices retracting lower and dollar index "uptrend seem to be pausing", DBS said in a note.
Meanwhile, U.S. data readings continue to point a resilient economy. U.S. business output ticked higher in October, with the manufacturing sector pulling out of contraction, data on Tuesday showed.
U.S. third-quarter GDP data is due on Thursday.
KEY INDICATORS: ** One-month non-deliverable rupee forward at 83.08; onshore one-month forward premium at 7.25 paisa ** Dollar index down at 106.16 ** Brent crude futures down 0.1% at $88 per barrel ** Ten-year U.S. note yield at 4.82% ** As per NSDL data, foreign investors bought a net $216.5mln worth of Indian shares on Oct. 20
** NSDL data shows foreign investors bought a net $79.7mln worth of Indian bonds on Oct. 20
